News & Insights

Temporary Wage Subsidy for Employers

Tax Development Apr 08, 2020

Prior to the Canada Emergency Wage Subsidy (CEWS), the Government of Canada announced the Temporary Wage Subsidy for Employers, which is a three-month subsidy allowing eligible employers to reduce their payroll deduction remittances to the Canada Revenue Agency (CRA).

Employers eligible for this subsidy include:

  • Non-profit organizations;
  • Registered charities;
  • Individuals;
  • Partnerships; and
  • Canadian-controlled private corporations (CCPCs) with less than $15 million of taxable capital employed in Canada during the preceding tax year, as calculated for an associated group.

To qualify for this subsidy, employers must be registered with the CRA and have a Payroll Program Account on the effective date, March 18, 2020.  In addition, the employer must be paying salaries, wages, bonuses, or other remuneration to an employee.

The CRA will grant an eligible employer a subsidy that is equal to 10% of the remuneration paid between March 18 and June 19, 2020.  The subsidy is up to $1,375 per employee to a maximum of $25,000 per employer.  Employers that qualify for this temporary subsidy are not required to share the $25,000 maximum with associated CCPCs.

The subsidy amount may be used to reduce the most current remittances of federal, provincial, and territorial income tax to the CRA.

Example of Calculation:

Number of Employees

5

Monthly Salary for Each Employee

$4,100

Total Monthly Payroll

$20,500

Subsidy Rate

10%

Subsidy

$2,050


In the above example, the employer may reduce its current payroll deduction remittance by $2,050.  In addition, the employer may reduce future income tax deduction remittances related to remuneration paid on or before June 19, 2020, for any unclaimed subsidy up to the maximum amount of $25,000.  However, the subsidy cannot be used to reduce remittances for Canada Pension Plan contributions or Employment Insurance premiums. 

Eligible employers may begin claiming the subsidy for the first remittance period that includes remuneration paid between March 18 and June 19, 2020.  In addition, eligible employers may choose to not reduce their payroll deduction remittances during the current year and claim the subsidy by making a payment request to the CRA at the end of the year.  Alternatively, a request can be made to have the subsidy amount transferred as a credit to next year’s payroll deduction remittances.

This temporary subsidy does not impact source deduction calculations for employees.  Employers should note that any subsidy used will have to be reported as income for the year in which it is received.

Further information on the Temporary Wage Subsidy for Employers can be found at:
Temporary Wage Subsidy for Employers - Frequently Asked Questions